Friday Watch

Night Trading 

• Asian equity indices are -1.0% to -.5% on average.

• Asia Ex-Japan Investment Grade CDS Index 67.25 +.5 basis point.

• China Sovereign CDS 41.0 +1.5 basis points.

• Bloomberg Emerging Markets Currency Index  66.18 unch.
• FTSE 100 futures n/a.

• S&P 500 futures -.07%.

• NASDAQ 100 futures -.05%.

Morning Preview Links

Earnings of Note 

Company/Estimate

Before the Open:

• (ABBV)/2.30
• (BABA)/10.68
• (AIG)/1.01
• (BAH)/.71
• (BGG)/-.72
• (CBOE)/1.15
• (CVX)/1.46
• (CL)/.70
• (D)/1.14
• (XOM)/.66
• (ITT)/.90
• (LYB)/2.76 
• (NWL)/.55
• (RUTH)/.10
• (STX)/1.00

After the Close:

• None of note

Economic Releases

8:30 am EST

• The Change in Non-Farm Payrolls for Oct. is estimated to fall to 85K versus 136K in Sept.
• The Unemployment Rate for Oct. is estimated to rise to 3.6% versus 3.5% in Sept.
• Average Hourly Earnings MoM for Oct. is estimated to rise +.3% versus unch. in Sept.

10:00 am EST

• The ISM Manufacturing Index for Oct. is estimated to rise to 49.0 versus 47.8 in Sept.
• The ISM Prices Paid Index for Oct. is estimated to rise to 50.0 versus 49.7 in Sept.
• Construction Spending MoM for Sept. is estimated to rise +.2% versus a +.1% gain in Aug.

Afternoon:

• Wards Total Vehicle Sales for Oct. is estimated to fall to 17.0M versus 17.19M in Sept.
  

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Vice Chair Clarida speaking, Fed's Quarles speaking, China Manufacturing PMI report could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and financial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% net long heading into the day.

Stocks Lower into Final Hour on China Trade Deal Concerns, Impeachment Uncertainty, Global Growth Worries, Energy/Transport Sector Weakness

 Broad Equity Market Tone:

• Advance/Decline Line: Lower
  

• Sector Performance: Almost Every Sector Declining
  

• Volume: Above Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 13.7 +10.7%

• Euro/Yen Carry Return Index 124.98 -.79%

• Emerging Markets Currency Volatility(VXY) 7.20 +.56%

• S&P 500 Implied Correlation 33.01 +18.4%

• ISE Sentiment Index 77.0 -16.0
  

• Total Put/Call 1.12 +16.7%

• NYSE Arms 1.37 +26.9%

Credit Investor Angst:

• North American Investment Grade CDS Index 55.21 +1.58%
  

• America Energy Sector High-Yield CDS Index 483.0 -.62%

• European Financial Sector CDS Index 59.82 +.62%

• Italian/German 10Y Yld Spread 133.0 -1.5 basis point
  

• Asia Ex-Japan Investment Grade CDS Index 67.0 +.93%
  

• Emerging Market CDS Index 198.84 +1.85%
  

• iBoxx Offshore RMB China Corporate High Yield Index 167.22 +.05%

• 2-Year Swap Spread 3.25 +1.0 basis point

• TED Spread 38.25 +4.75 basis points

• 3-Month EUR/USD Cross-Currency Basis Swap -19.0 -1.25 basis points

Economic Gauges:

• Bloomberg Emerging Markets Currency Index 66.18 -.15%
• 3-Month T-Bill Yield 1.53% -7.0 basis points

• Yield Curve .16 -3.0 basis points

• China Iron Ore Spot 82.78 USD/Metric Tonne +2.3%

• Citi US Economic Surprise Index 4.7 -3.1 points

• Citi Eurozone Economic Surprise Index -43.10 +9.1 points

• Citi Emerging Markets Economic Surprise Index -27.0 -6.2 basis points

• 10-Year TIPS Spread 1.60 -2.0 basis points
• 53.6% chance of Fed rate cut at Jan. 29th meeting, 63.5% chance of cut at March 18th meeting

Overseas Futures:

• Nikkei 225 Futures: Indicating -209 open in Japan 
• China A50 Futures: Indicating -31 open in China

• DAX Futures: Indicating +1 open in Germany

Portfolio:

• Lower: On losses in my tech/biotech/industrial/retail sector longs

• Disclosed Trades: Added to my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 75% Net Long

Bull Radar

Style Outperformer:

• Large-Cap Growth -.3%

Sector Outperformers:

• 1) Gold & Silver +1.7% 2) Social Media +.6% 3) Paper +.6%

Stocks Rising on Unusual Volume:

• MUSA, OLED, CRUS, STAA, EGOV, KHC, MC, ABMD, UCTT, TDOC, INOV, TPX, BLD, FLWS, NTCT, SPXC, LKQ, LITE, CSGS, BWA, WHD, VIAV, SRCL, MIC, ATI, NTLA, NUVA, CFX, DT, BJ, LSI, MUR, EQT, DNKN, TFX, INSM, CDAY, CNMD, DX, DRNA, OII, GNRC, EXAS, YEXT, AGNC, IDXX, LSXMA, SFM and LNTH

Stocks With Unusual Call Option Activity:

• 1) TDOC 2) OLED 3) ETSY 4) MET 5)EMB

Stocks With Most Positive News Mentions:

• 1) CRUS 2) CRAI 3) KHC 4) DNKN 5) TPX

Charts:

• ETFs Rising on Unusual Volume
• Stocks Rising on Unusual Volume

Morning Market Internals

NYSE Composite Index:

• Volume Running +19.3% Above 100-Day Average
• 3 Sectors Rising, 8 Sectors Declining
• 31.7% of Issues Advancing, 65.8% Declining
• 117 New 52-Week Highs, 56 New Lows
• 58.0% of Issues Above 200-day Moving Average
• Average 14-Day RSI 49.9%
• Vix 13.3 +7.6%
• Total Put/Call .89 -7.3%
• TRIN/Arms 1.49 +37.9%

Thursday Watch

Evening Headlines

Bloomberg:

• Hong Kong Cuts Base Rate After Fed as City Slides Into Recession.    

• Negative Interest Rate Skepticism Grows at the European Central Bank.

• Samsung Profit Beats as Smartphone Profits Offset Chip Slump.

• Jho Low Gives Up $1 Billion in Assets to Settle 1MDB Suits.   

• Brazil to Extend Rate Cuts With Easing Cycle at Cruising Speed.

• Asia Stocks Trade Mixed; Treasuries Rally Stalls. Stocks in Asia were mixed after the Federal Reserve indicated that it’s unlikely to move in either direction any time soon following its latest interest-rate cut, while corporate results continued to roll in. Gains in Treasuries petered out. Japanese shares opened flat, while equities in Sydney slipped. Seoul saw gains after earnings at Samsung Electronics Co. topped estimates. The S&P 500 earlier edged up to a fresh-all time high when Fed Chairman Jerome Powell said rate hikes won’t occur as long as inflation remains persistently cool. Nasdaq futures rose as Apple Inc. projected sales that beat expectations. The offshore yuan held on to gains, while the yen was steady ahead of the Bank of Japan’s policy decision. Japan’s Topix index was little changed as of 9:06 a.m. in Tokyo. South Korea’s Kospi index added 0.8%. Australia’s S&P/ASX 200 Index slid 0.1%. Futures on the S&P 500 Index were flat. The underlying gauge rose 0.3% on Wednesday.  

• Five Things You Need to Know to Start Your Day.

• Powell Signals Fed Policy on Hold as Economy Eyes Soft Landing.

• Fidelity Fund Slashes Value of Its Juul Stake by Almost 50%. 

• The Drone Wars Are Already Here.  

• Six Strategists on Why Stocks Didn’t Lose It Over Tougher Powell.  

• Lyft Tops Sales Estimates on Rider Growth; Raises Outlook.

Wall Street Journal:

• Protesters Fuel Unrest, Rattling Arab Leaders.

• How China Manages Money American-Style, in 17 Charts.

• The Democrats’ Spooky Politics.

• Fed Cuts Rate for a Third Time This Year, Signals Pause in More Reductions.

• New California Fire Threatens Reagan Library.

• Fiat Chrysler and Peugeot Owner PSA Agree to Merge.

• Bipartisan House Deal Opens Path to Citizenship for Illegal Immigrant Farm Workers.

• The Link Between Diet, Exercise and Alzheimer’s.

Fox News:

• Dramatic video of operation targeting ISIS boss Baghdadi released by Pentagon.

CNBC:

• Apple(AAPL) stock rises on earnings beat.

• Powell aces tricky Fed transition to ending interest rate cuts, doing ’100% the right things’.

• US lawmaker urges White House to quickly finalize plan to pull flavored e-cigarettes off the market.

• When Fed cuts interest rate three times and pauses, it’s great for stocks, history shows.

• Stocks making the biggest moves after hours: Apple, Facebook, Lyft and more.

Zero Hedge:   

• Nigel Farage's Brexit Party May Pull Out Of 100s Of Races In Surprise Deal With Conservatives.

• Yes, Virginia, There Is A Deep State And It's Feeding The Anti-POTUS Mob.

• Adam Schiff Coached Alexander Vindman Throughout Impeachment Testimony: Nunes.

• Crashing To Earth: Masa Son Speaks To "Almost Empty" Room At "Davos In The Desert".

• Twitter To Ban Political Advertising, Because "Reach Should Be Earned".

• Fed Cuts Rates On Day GDP Beats Expectations, Sending Stocks To New All Time High.

Night Trading 

• Asian equity indices are -.25% to +.75% on average.

• Asia Ex-Japan Investment Grade CDS Index 66.75 +.75 basis point.

• China Sovereign CDS 39.5 +.75 basis point.

• Bloomberg Emerging Markets Currency Index  66.31 +.05%.

• FTSE 100 futures n/a.

• S&P 500 futures +.06%.

• NASDAQ 100 futures +.17%.

Morning Preview Links

Earnings of Note 
Company/Estimate

Before the Open:

• (ATI)/.33

• (MO)/1.15

• (AMT)/1.77

• (ADM)/.71

• (AVP)/.02

• (BWA)/.85

• (BMY)/1.07

• (CI)/4.37

• (CLX)/1.54

• (DLPH)/.56

• (DNKN)/.81

• (DD)/.95

• (EL)/1.60

• (FCAU)/.80

• (FLIR)/.58

• (FLR)/.30

• (IDXX)/1.14

• (ICE)/.96

• (IP)/1.00

• (KHC)/.54

• (MUR)/.20

• (PH)/2.66

• (RDS/A)/.49

• (SNY)/1.72

• (W)/-2.05

• (YETI)/.26

• (YRCW)/-.19

After the Close:

• (ANET)/2.40

• (CAR)/3.64

• (BGS)/.57

• (LOCO)/.18

• (MTZ)/1.62

• (RMAX)/.57

• (X)/-.27

Economic Releases

• None of note

Upcoming Splits

• None of note

Other Potential Market Movers

• The Eurozone CPI report and the weekly EIA natural gas inventory report could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.